A Full Set for ASIC as Macquarie Accepts Enforcement Undertaking

Following similar settlements from the big four Australian
banks, Macquarie Bank has also accepted an enforceable undertaking (EU) from the
Australian Securities Investment Commission (ASIC) in relation to the bank’s FX
businesses.

Following an investigation, the regulator says it is
concerned that the bank failed to ensure that its systems and controls were
adequate to address risks relating to instances of inappropriate conduct
identified by ASIC.

“The wholesale spot foreign exchange market is one the
world’s largest financial markets and the proper functioning of this market is
of vital importance to the Australian economy,” says ASIC commissioner Cathie
Armour. “ASIC has now accepted undertakings from some of Australia’s largest
market participants to put in place forward looking processes and controls to
ensure that their foreign exchange businesses provide financial services honestly,
efficiently and fairly.

“ASIC will continue to ensure that there can be ongoing
confidence in how our financial institutions conduct themselves now and into
the future,” she adds.   

ASIC says that between 1
January 2008 and 30 June 2013, on a number of occasions, Macquarie
employees disclosed to external third parties confidential details of pending
client orders including identification of a client; inappropriately disclosed
to external third parties confidential and potentially material information
about Macquarie’s trading activity associated with large pending AUD orders;
and when the market approached the trigger price of a stop loss order,
Macquarie spot FX traders responsible for managing the order traded in a manner
that may have been intended to cause the trigger price to trade when it might
not have traded at that time.

Using almost identical language to the previous four EUs
brought against ANZ, CBA, NAB and Westpac, ASIC says is concerned that
Macquarie did not ensure that its systems, controls and framework for supervision
and monitoring were adequate to prevent, detect and respond to such conduct,
which had the potential to undermine confidence in the proper functioning and
integrity of the market.

As is the case with the other four banks, Macquarie has
committed to developing a programme of changes to its existing systems, controls,
training, guidance and framework for monitoring and supervision of employees in
its spot FX and non-deliverable forwards (NDF) businesses to prevent, detect
and respond to inappropriate disclosure of confidential information to external
market participants as well as inappropriate order management and trading in
respect of stop loss orders.

ASIC will appoint an independent consultant to assess the
programme and its implementation, which will incorporate changes already made
by Macquarie as part of ongoing reviews of its businesses.

Upon implementation of that program, for a period of three
years, Macquarie will conduct an annual internal review of the programme, which
will be independently assessed, and provide an annual attestation from its
senior executives to ASIC.

Macquarie will also make a community benefit payment of AUD 2
million to The Smith Family to support The Smith Family’s financial services
program aimed at improving young people’s understanding of money management –
CBA and NAB paid AUD 2.5 million, ANZ and Westpac paid AUD 3 million.

This settlement means that the top five Australian banks
have all agreed to EUs from ASIC relating to their FX business.

Colin_lambert@profit-loss.com

Twitter @lamboPnL

Twitter @Profit_and_Loss

Colin Lambert

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